Priority Rules in Secured Transactions under UCC Article 9, Ontario PPSA and Australia PPSA

1. Introduction

Secured transactions law provides the legal framework that allows lenders and other creditors to take an interest in a debtor’s personal property as collateral to secure an obligation.

In a secured transaction, the creditor (secured party) obtains a security interest in the debtor’s assets, which can be enforced if the debtor defaults.

This area of law is crucial for modern commerce because it facilitates credit by reducing risk: creditors have confidence they can recover value from collateral, which in turn lowers the cost of borrowing for debtors.

The body of rules governing secured transactions defines how security interests are created (attachment), made effective against third parties (perfection), how conflicts between competing interests are resolved (priority), and the steps a secured party can take upon default (enforcement)​.

Priority rules determine whose interest wins if multiple parties claim rights in the same collateral. These rules are central to secured transactions – they promote predictability and fairness by establishing a clear hierarchy of claims​.

Without predictable priority rules, lenders would be reluctant to extend credit, fearing that their collateral could be claimed by someone else unexpectedly. Likewise, enforcement mechanisms are vitally important.

A security interest is only as valuable as the ability to enforce it when a debtor defaults. Thus, secured transactions regimes provide secured creditors with rights to repossess and sell the collateral or otherwise satisfy the debt, while also protecting debtors from undue harm or unfair practices in the enforcement process​.

This article presents a critical analysis of the priority rules and enforcement of security interests under three major secured transactions legal regimes: UCC Article 9 in the United States, the Ontario Personal Property Security Act (PPSA) in Canada, and the Australian PPSA.

All three systems share a common conceptual foundation and functional approach, but they also exhibit important differences in detail and policy. We will survey the legal frameworks of each system, compare their priority rules (including general rules, purchase money security interests, and the effect of perfection and registration, with case illustrations), and examine how each regime approaches enforcement of security interests upon debtor default.

2. Legal Frameworks: UCC Article 9, Ontario PPSA, and Australian PPSA

2.1 UCC Article 9 (United States)

Article 9 of the Uniform Commercial Code governs secured transactions in personal property in the U.S. It was first introduced in the late 1950s and has been revised periodically (notably in 1972 and again in 1998, with the latter often called “Revised Article 9”).

Article 9 applies to any transaction that creates a security interest in personal property by contract, as well as certain sales of receivables​.

It provides a comprehensive scheme for attachment, perfection (primarily by filing a financing statement, but also by possession or control for certain collateral), priority, and enforcement of security interests.

Each state has enacted Article 9 (with minor local variations), making it a near-uniform law across U.S. jurisdictions.

A hallmark of Article 9 is its notice-filing system: a creditor perfects a security interest usually by filing a simple notice (financing statement) in a public registry, rather than a detailed transaction document, which puts others on notice of the claim​.

Article 9 also embraces a functional approach to security interests – it looks at the substance of a transaction rather than its form or title. For example, leases intended for security, consignments, and sales of accounts can be treated as security interests under Article 9, ensuring that the priority rules apply to them and preventing form-driven evasion​

2.2 Ontario PPSA (Canada)

Ontario’s Personal Property Security Act (PPSA) is one of the provincial Canadian secured transactions statutes modelled largely on the UCC Article 9 paradigm.

Ontario’s PPSA (originally enacted in the 1960s and overhauled in 1989) replaced a patchwork of older chattel security laws with a unified framework​.

Like Article 9, the Ontario PPSA adopts a functional approach: any transaction that in substance creates a security interest in personal property is subject to the Act, regardless of the form (this includes conditional sales, chattel mortgages, assignments of receivables for security, certain leases, etc.).

It too establishes rules for attachment, perfection (primarily by registration of a financing statement in the electronic PPSA registry), priority, and enforcement.

Each Canadian province (except Quebec) has its own PPSA; while there are local variations, the core principles are similar. Ontario’s PPSA is often used as a reference point, and it closely resembles Article 9 with some differences in drafting and specific provisions​.

For instance, Ontario PPSA explicitly allows certain “deemed” security interests (like lengthy leases or commercial consignments) and has its own registration system at the provincial level.

One key difference in Canada is that the PPSA coexists with the federal Bank Act security regime and, in Quebec, the civil law hypothec system – though those are beyond our scope, it’s worth noting the PPSA’s influence does not extend nationwide (Quebec follows a civil code system)​.

2.3 Australian PPSA

Australia’s Personal Property Securities Act 2009 (Cth) is a relatively recent law (effective 2012) that created a single national system for secured transactions in personal property.

The Australian PPSA was inspired by New Zealand’s PPSA (1999) and, indirectly, by Canadian PPSAs (particularly Saskatchewan’s) and Article 9​.

Prior to 2012, Australia had disparate laws (such as Bills of Sale Acts, company charges under the Corporations Act, etc.), but the PPSA introduced a unified federal regime, preempting state laws.

It established the Personal Property Securities Register (PPSR), an online registry for filings, and adopted the now-familiar triad of attachment-perfection-priority rules.

The Australian PPSA’s scope and concepts closely resembles those of the Canadian PPSAs and Article 9 – it uses a functional definition of security interest, covers traditional security devices and title-retention arrangements (like Romalpa/retention of title clauses and certain leases deemed as security interests called “PPS leases”), and provides for perfection by registration, control, or possession​.

​Notably, the Australian PPSA is federal legislation, which ensures one consistent system across all states and territories (unlike the state-by-state enactment of Article 9 or provincial nature of the PPSA in Canada).

However, the Australian lawmakers did not copy the North American models wholesale; they made several piecemeal policy choices and drafting tweaks​.

For example, Australia included specific provisions on personal property securities leases, set different default timeframes for registering PMSIs, and integrated the PPSA with existing Australian insolvency law and other statutes.

3. Priority Rules in Secured Transactions

Priority rules determine whose rights prevail when multiple security interests (or other claims) exist in the same collateral.

The general priority framework is remarkably consistent across Article 9, the Ontario PPSA, and the Australian PPSA, built on the ideas of first-in-time perfection and the importance of perfection methods.

However, each system has its own statutory wording and occasional unique priority provisions. This section analyses the general rules of priority, the treatment of purchase money security interests (PMSIs), resolution of competing claims, the effect of registration and perfection on priority, and illustrates these rules with relevant case law from the U.S., Ontario, and Australia.

3. 1 General Priority Rules: First-to-Perfect and First-to-Attach

All three regimes prioritise security interests primarily by the timing of perfection. In general, a perfected security interest (one that has been properly made effective against third parties by filing/registration, possession, or control) will have priority over an unperfected security interest in the same collateral​.

​This fundamental rule is often the first priority rule stated in the statutes. For example, Ontario’s PPSA s30(1)(a) provides that a perfected security interest has priority over an unperfected one​.

Similarly, Australia’s PPSA s55(3) and (4) state that perfected interests take precedence over unperfected interests​.

UCC Article 9 mirrors this in UCC 9-322(a)(2), and also in UCC 9-317 which gives a perfected secured party priority over certain lien creditors who obtain their interest after the security interest is perfected​.

The policy rationale is clear: a creditor who has taken the steps to publicise its interest (or otherwise perfect it) deserves priority over one who has not, even if the latter’s interest attached earlier in time.​

​When two or more security interests are perfected, the conflict is generally resolved by the rule of “first to file or register” (or first to perfect) in all three systems.

In other words, priority goes to the secured party that was first to put its interest on the public record or otherwise perfect, provided that initial perfection continues without interruption​.

Under UCC 9-322(a)(1), if both security interests are perfected, priority dates from the earlier of the time a filing covering the collateral was made or the time the interest was first perfected (if there’s no lapse)​.

The Ontario PPSA’s general priority rule in s30(1)(b) is to similar effect – it effectively establishes priority by order of registration when more than one interest is perfected (and if perfection is by different means, by the earliest date of perfection)​.

The Australian PPSA also follows a first-in-time principle: s55(4) provides that as between perfected security interests, priority is by the earliest priority time, which in cases of perfection by registration is the time of registration​.

In practical terms, this means that a secured creditor who files/registers a financing statement early (even before the security interest actually attaches, in the case of Article 9 and PPSA which allow advance filing) can secure a priority position over others who perfect later​.

This is a crucial feature of notice-filing – it rewards prompt public notice rather than the speed of attachment or the discovery of competing claims.

If both security interests are unperfected, then the rule flips to first to attach (or “first in time” in terms of the underlying interest)​.

UCC 9-322(a)(3) states that among unperfected security interests, priority goes to the one that attached first (since neither party perfected, the filing rule doesn’t apply). Ontario’s PPSA s30(2) and Australian PPSA s55(5) similarly subordinate an unperfected interest that attached later to one that attached earlier​.

However, it should be noted that an unperfected security interest is also vulnerable to third parties beyond just other secured creditors: for instance, under each system, a buyer of the collateral or a lien creditor (such as a bankruptcy trustee or judgment creditor) can often take priority over an unperfected security interest​.

A dramatic illustration is the Canadian Supreme Court case Royal Bank of Canada v 216200 Alberta Ltd. (Re Giffen), where a secured creditor’s failure to register (perfect) its security interest in a car meant that when the debtor went bankrupt, the trustee in bankruptcy (analogous to a lien creditor) defeated the unperfected interest – the secured party was treated as unsecured and the collateral’s value went to the estate​.

This clarifies the importance of timely perfection: an unperfected interest is not only junior to any perfected interest but can even lose priority to the debtor’s other creditors and transferees.

Title is generally irrelevant to priority. One of the revolutionary aspects of Article 9, followed by the PPSAs, is that the priority contest is framed in terms of perfected vs unperfected security interests, not who has title to the goods​.

As the New South Wales Supreme Court observed in the leading Australian case Re Maiden Civil (P&E) Pty Ltd [2013] NSWSC 852, when resolving a competition between a lessor (who retained title to equipment) and a lender with a security interest in the lessee’s property, the dispute “is not about ownership, but about priority.

In that case, the equipment lessor had not registered its interest (a long-term lease, deemed a security interest under the PPSA), whereas the lender had a perfected security interest covering the equipment.

The court held that the perfected security interest had priority over the unperfected interest of the owner-lessor, meaning the lender’s right prevailed and could claim the equipment, despite the lessee never owning it outright​.​

This outcome, shocking to those used to thinking “owner wins”, reflects the PPSA’s and Article 9’s mandate that a reservation of title is treated as just another security interest. The Maiden Civil case thus highlights in real-world terms the basic priority rule: perfected beats unperfected, regardless of title.​

Similarly, in North America, courts have long recognised that a retention-of-title seller or lessor who fails to comply with Article 9/PPSA perfection requirements will lose priority.

For example, under UCC Article 9-202, a consignor of goods must perfect its interest (often by filing) or else risk the consignee’s creditors having priority; a consignor who neglects this and leaves goods with the buyer can find its interest subordinate to a factor’s security interest in the consignee’s inventory​

The policy here is to protect third-party reliance on the apparent ownership of the debtor: if a debtor is allowed to hold and use collateral as if it were theirs, those who extend credit relying on those assets should be protected, unless the original owner/secured party gave public notice of their claim.

Another aspect of the general priority framework is how future advances are treated. All three systems provide that a security interest can secure future loans or advances, and the priority of the security interest (once perfected) extends to all advances under the secured credit relationship without the need for re-filing.

In other words, once you have a perfected security interest, later loans by the same creditor may tack onto that interest and share its priority date.

UCC 9-322(a)(1) explicitly covers future advances, and Ontario PPSA s30(6) and Australian PPSA s55(6) similarly clarify that priority dates from the original perfection regardless of whether the collateral also secures future advances made later​.

This “tacking” of future advances means that a secured party who files first not only has priority for the loan initially given, but also for any subsequent credit it extends (perhaps via a revolving line of credit), even if another creditor intervenes in the meantime.

The only caveat is if the secured party’s interest had somehow lapsed or was unperfected at the time of the advance, but continuous perfection preserves the priority.

This rule prevents complex temporal slicing of priority and aligns with commercial practice (e.g. banks often lend continuously under one security agreement). It also replaces old common-law rules like “tacking” under equity or notice-based cut-offs with a clear statutory rule​.

Of course, parties remain free to alter priority by agreement (subordination). All three regimes uphold contractual subordination, where a secured creditor can agree to subordinate its priority to another (UCC s9-339; OPPSA s38; Aussie PPSA s61).

This does not change the operation of the default rules, but it means the apparent first priority creditor may contractually allow a junior creditor to step ahead. Such agreements are common in inter-creditor arrangements (e.g. between a senior lender and a mezzanine lender)​.

The statutes generally enforce subordination agreements according to their terms, thereby injecting flexibility into the otherwise rigid first-to-file priority scheme​.

3.2 Purchase Money Security Interests (PMSIs) and Super-Priority

A major exception to the pure first-to-file rule is the treatment of purchase money security interests (PMSIs). A PMSI is a special type of security interest that enables a debtor to acquire new collateral.

A PMSI typically arises in two situations: (1) a seller of goods retains a security interest in the goods sold to secure the purchase price (often called a vendor PMSI), or (2) a lender advances funds to the debtor specifically to acquire an asset, and takes a security interest in that asset (a lender PMSI)​.

All three regimes recognise that PMSIs deserve super-priority to encourage and accommodate purchase-money financing. In effect, a PMSI, if properly perfected and if certain conditions are met, can take priority over other security interests that were perfected earlier (even if those earlier interests cover after-acquired property of the debtor).

3.2.1 Definition and Rationale

The PPSA statutes (Ontario and Australia) explicitly define PMSI in a manner very close to Article 9’s definition​

For example, Ontario PPSA s1(1) and Australian PPSA s14 define a PMSI to include a security interest taken in collateral to secure its own purchase price or to secure value given to enable the debtor to acquire the collateral (to the extent the value is so used). This aligns with UCC Article 9-103’s definition​.

The economic rationale is that a party who facilitates the acquisition of an asset (by selling on credit or lending purchase money) should be able to claim that asset ahead of others; otherwise general lenders could lock up all after-acquired assets, leaving no room for purchase-money credit.

However, to prevent abuse (e.g. characterising any loan as purchase money after the fact), the law imposes strict perfection and notice timing for PMSIs to get their special priority.

3.2.2 PMSI in Goods (Inventory vs Equipment)

UCC Article 9 and the PPSAs distinguish between PMSIs in inventory (goods held for sale or lease, or consumed in business, like raw materials) and PMSIs in other goods (often equipment or consumer goods).

For non-inventory goods (e.g. equipment, machinery, or any goods not classified as inventory or livestock), the requirement to get PMSI super-priority is generally to perfect the PMSI quickly after the debtor receives the collateral.

Under UCC Article 9, a PMSI in goods other than inventory or livestock has priority over conflicting interests if the PMSI is perfected within 20 days after the debtor receives the goods (UCC 9-324(a)).

Ontario’s PPSA is similar but typically uses a 15-day window for non-inventory PMSIs (Ontario PPSA s33(1)(b) provides 15 days from possession to perfect)​. The Australian PPSA likewise set a default of 15 business days for PMSI perfection in non-inventory collateral​.

The slightly different timeframes (20 days U.S., 15 days in Ontario, 15 business days in Australia) are technical details, but the principle is the same: the purchase-money secured party must act quickly to register its interest. If it does, it gains priority even over other secured creditors who perfected earlier or have a floating charge on after-acquired property​.

For inventory PMSIs, the rules are stricter because inventory collateral turns over rapidly and often is subject to revolving credit arrangements.

A classic example is a bank with a blanket security interest in all inventory vs. a vendor who supplies new inventory on credit – who wins? Under UCC 9-324(b), a PMSI in inventory will have priority over an existing perfected security interest in the same inventory (and identifiable cash proceeds) only if two conditions are met:

1. The PMSI is perfected at the time the debtor receives possession of the inventory (no grace period – effectively before or at arrival).
2. The PMSI holder sends an authenticated notice to the holder of any conflicting security interest who had filed a financing statement covering that inventory, telling them of the PMSI before the debtor receives the inventory​.

Ontario’s PPSA has analogous requirements (15 days pre-possession registration and prior notice to other inventory secured parties, see OPPSA s33(1)(a)) – in practice, a PMSI supplier in Ontario must register and give written notice to any prior secured party who has a general security interest in inventory, explaining that they are taking a PMSI in the new inventory​.

The Australian PPSA similarly requires a PMSI in inventory to be perfected by registration before the debtor obtains possession and, for non-consumer inventory, to give a notice if the inventory is subject to a prior AllPAP (all-assets security) – specifically, Australian regulations require a PMSI holder to notify prior secured parties at least 15 business days before taking the PMSI or before the debtor receives the goods (see PPSA 2009 (Cth) s64)​.

If these conditions are satisfied, the PMSI receives a “super-priority”, trumping earlier-filed security interests to the extent of the purchase-money collateral.

A simple illustration: Debtor grants Bank a general security interest in all present and after-acquired property, which Bank perfects. Later, Debtor buys new equipment from Seller on credit; Seller files a PMSI financing statement within 15 days. Seller’s PMSI will have priority in that equipment over Bank’s prior interest​.

If Debtor instead buys inventory (e.g. stock for resale) from Supplier on credit, Supplier must ensure it files and notifies Bank before the inventory arrives. If done, Supplier’s PMSI in the inventory (and usually its identifiable proceeds like accounts from sale) defeats Bank’s claim in those assets​.

Case law confirms these rules: In the U.S., Morgan County Feeders, Inc. v. McCormick, 836 P.2d 1051 (1992) illustrated that a feed supplier with a perfected PMSI in livestock feed could outrank an earlier lender’s lien, but only for the livestock that consumed the feed if the statute allowed (Article 9 provides a PMSI in livestock with some similar rules to inventory).

In Canada, courts have enforced the notice requirements strictly – e.g., Bank of Nova Scotia v. Advance Engineered Products Ltd. (Sask. CA 1993) denied PMSI priority to a creditor who perfected in time but failed to send proper notice to the prior secured lender; the lack of notice meant the general first-to-register rule was not displaced.

These examples show that while PMSIs are powerful, they are also technically demanding to obtain.

3.2.3 PMSIs in Proceeds and Conflicts with Receivables Financiers

An interesting nuance arises with proceeds of inventory, especially accounts receivable generated by the sale of inventory.

A creditor with a PMSI in inventory typically also has a perfected security interest in identifiable proceeds of that inventory (by virtue of continuous perfection rules for proceeds – e.g., UCC 9-315(c), OPPSA s25).

Thus, when inventory is sold on credit, the PMSI extends to the resulting accounts receivable. Meanwhile, another financier might be financing the accounts receivable (a receivables factor or a lender with an assignment of book debts).

Who wins between an inventory PMSI claimant (with proceeds) and a receivables financier? This has been a tricky priority issue with different approaches.

Article 9’s approach, followed by Western Canadian provinces, is that a receivables secured party who had perfected (and gave new value on the receivable) before the PMSI holder perfected its interest in the inventory (and proceeds) will have priority in the accounts​

In contrast, some PPSAs (e.g., Ontario and New Zealand) give the inventory PMSI priority in the receivables proceeds automatically, without a further notice requirement​.

Other provinces (Atlantic Canada) take a middle road, requiring the inventory PMSI holder to give a notice to the receivables financier to preserve priority in the proceeds​.

Ontario’s PPSA currently favours the inventory PMSI: the PMSI creditor with a perfected inventory PMSI has priority in both the inventory and its receivable proceeds, with no special notice requirement as against a receivables assignee​.

This is a more generous rule for PMSI holders (and arguably harsher for receivables lenders) than the Article 9 rule. By contrast, Article 9 (and e.g. Saskatchewan PPSA) would protect the receivables financier who files first on accounts, unless they got a PMSI notice.

This kind of difference is technical, but important in asset-based lending – it means in Ontario a general accounts lender runs a higher risk if its client also has inventory floor plan financing with PMSI terms, because the inventory financier could sweep the accounts as proceeds.

There have been proposals for Ontario to adopt the Atlantic/notice approach to better protect receivables lenders​, but as of now the law gives the PMSI holder the edge.

3.2.4 Other types of PMSIs

Both Article 9 and the PPSAs extend PMSI treatment beyond goods in some cases. For instance, the PPSA definition and UCC include a PMSI in software if the software is embedded in goods and the PMSI covers the goods.

Also, PMSI in fixtures (goods that become attached to real estate) can have special priority over a mortgage on the land if certain additional steps (like a fixture filing) are taken – all three regimes have provisions dealing with fixtures to protect a PMSI seller of equipment that gets affixed to land (e.g., UCC s9-334, OPPSA s34).

4. Competing Security Interests and Special Priority Situations

Beyond the basic rules and PMSIs, secured transactions law provides specific rules for particular types of competing claims or collateral situations.

These include priorities involving investment property and deposit accounts, negotiable collateral, as well as special liens and statutory interests that can trump Article 9/PPSA interests.

4.1 Perfection by Control vs Filing

One notable special rule is that for certain types of collateral, a secured party who perfects by taking control of the asset has priority over one who merely perfected by filing/registration.

This is explicit in UCC Article 9 for collateral like deposit accounts (UCC Article 9-327), investment securities (UCC 9-328), and letter-of-credit rights (UCC 9-329).

For example, a bank with a security interest in a deposit account perfected by control (often by being the bank where the account is maintained) will have priority over another creditor who perfected by filing a financing statement against the debtor​

The rationale is that such assets are essentially contests of control, and a party who actually controls the account or securities can be confident enough in their priority to extend credit.

The Canadian and Australian laws have similar rules: under Ontario’s PPSA, perfection of investment property (like securities or security entitlements) can be by control under the Securities Transfer Act 2006, and a controlled party defeats a merely registered party​.

Australia’s PPSA, in harmony with modern principles, allows control perfection for investment instruments and intermediated securities, and gives those interests priority (see PPSA (Cth) s57, s21(2)(c)).

Deposit accounts (as collateral) are a special case: in Ontario PPSA, an assignment of a bank account as collateral is typically perfected by registration (there is no concept of control over general deposit accounts in the PPSA itself, except perhaps via the Bank Act security in Canada), whereas Article 9 specifically restricts perfection of deposit accounts (as original collateral) to control only (UCC 9-312(b)(1)).

The Australian PPSA takes an approach closer to Article 9: it permits control perfection of “ADI accounts” (accounts in authorised deposit-taking institutions) and grants priority to the account bank or controlling secured creditor.

So, in a multi-jurisdiction deal involving securities accounts, one must be mindful that U.S. and Ontario law both acknowledge control agreements that give a secured lender priority in the investment property over others who filed notice​.

4.2 Negotiable Collateral (Instruments, Documents, Chattel Paper)

For collateral that is represented by a physical document whose possession equates to ownership (like negotiable instruments or negotiable warehouse receipts), all systems give priority to a secured party who perfects by taking possession (or control in the case of electronic chattel paper) over one who perfects by filing.

UCC 9-330, for instance, gives a special priority to a secured party who possesses negotiable instruments or documents (essentially treating them similarly to a holder in due course in some respects), even over prior filed interests, under certain conditions (they must give value and take possession in good faith without knowledge of the other claim).

The PPSAs have comparable provisions. For example, Ontario PPSA s28(3) and (4) provide that a transferee or secured party who obtains possession of chattel paper or an instrument in the ordinary course of business can have priority over earlier security interests in that chattel paper.

These rules recognise the commercial expectation that negotiable assets and chattel paper (like retail instalment contracts) may be bought and financed, and that those who deal in them and take possession should be protected to keep these markets fluid.

4.3 Buyers and Transferees vs Secured Parties

Priority rules also deal with when a buyer of the collateral takes free of security interests. A full treatment is beyond scope, but briefly: UCC and PPSA each have the concept of a “buyer in the ordinary course of business” of goods taking free of a security interest created by the seller (even if perfected and even if the buyer knew of its existence, as long as they didn’t know it violated the rights of the secured party).

This important protection (UCC 9-320(a), OPPSA s28(1)) ensures that security interests in inventory do not unduly impede commerce – customers can buy from a retailer without fearing a bank’s lien on inventory.

Article 9 and PPSA also let buyers of goods free of unperfected security interests generally (UCC s9-317(b); OPPSA s20(1)(b) gives that a buyer not knowing of an unperfected interest takes free).

There are specific provisions for consumer-to-consumer sales (the so-called garage sale rule: a buyer of consumer goods for personal use may take free of a PMSI if the item was under a certain value and they didn’t know of it, unless the secured party had filed – UCC 9-320(b), with PPSA analogues).

These rules are a reminder that the priority “ladder” isn’t just among secured creditors, but also vis-à-vis certain good-faith acquirers.

4.4 Fixtures, Accessions, Commingled Goods

Each system also addresses things like when personal property collateral becomes affixed to real estate (fixtures), or mixed with other goods (commingling, like manufacturing), or installed as components (accessions).

Typically, a security interest in goods that become fixtures may lose priority to a mortgagee of the land unless the secured party made a fixture filing in the real property registry (Article 9’s approach), or, under PPSAs, unless it has a PMSI in the fixtures and registered that interest within a certain time.

Likewise, if goods are processed or combined, the law has rules for how security interests continue or attach to the product or mass (often giving proportionate interest or following the main product).

These rules prevent bizarre results when collateral changes form. An example can be found in a leading Canadian case, International Harvester Credit Corp. v. Smith, 621 F. Supp. 1005 (D. Nev. 1985), which dealt with a combine (farm equipment) that was affixed to land – who had priority, the equipment financer or the realty mortgagee?

The PPSA fixture provisions were applied to decide priority. Although such specifics are beyond our primary scope, it is important to note that beyond the standard priority rule, Article 9 and PPSAs have an extensive framework of special priority rules for particular scenarios​.

5. Practical Challenges With Perfection and Conclusion

Even within one jurisdiction, secured parties face practical challenges using the registry systems:

5.1 Cost and Accessibility

Some critics point out that while notice-filing is efficient for commercial lenders, ordinary small businesses or individuals might find the system arcane. The forms, the strict requirements, the concept of public registration of what might be a private loan – these can be off-putting.

For instance, a farmer who leases equipment might not realise he (as lessor) should register a PPSA financing statement to protect his ownership; if he fails and the lessee’s bank grabs the equipment, he loses out (as in some cases we discussed).

This has happened in Australia with many retention of title suppliers unaware of the PPSA change, leading to losses when customers went insolvent.

5.2 Registration Errors

The notice-filing system can be unforgiving if a creditor makes a mistake in the debtor’s name or other required information. A slight misspelling or use of a trade name instead of the legal name can render a filing ineffective.

For instance, the famous U.S. case in Re EDM Corp., 431 BR 459, 71 UCC Rep. Serv. 2d 876 (2010), saw a financing statement deemed seriously misleading (hence ineffective) because the debtor’s name was slightly wrong.

The Australian PPSR is also very strict: if a serial number or grantor name is wrong, the registration can be ineffective. These systems thus face the criticism that they are “trap doors” for the unwary – a simple clerical error might unjustly defeat a security interest.

On the flip side, this strictness incentivises due diligence and provides clear outcomes.Some jurisdictions have tried to mitigate this: for example, Revised Article 9 provided more guidance on individual debtor names (the “only if” rule: use the license name exactly) to reduce uncertainty.

Ontario’s update to have debtors’ birthdates is to reduce false positives in searches. Nonetheless, creditors frequently invest in professional search and filing services to avoid errors. The complexity of some debtors (like trusts, partnerships) can still cause confusion over how to list them.

5.3 Debtor Name Changes or Relocations

Another challenge is maintaining perfection over time. If a debtor changes its name or merges, or moves to a new jurisdiction, the secured party often has a limited time (typically 4 months in U.S., also short periods in PPSAs) to discover and amend filings.

Missing such a change can cause a perfected interest to become unperfected as to new collateral. Tracking these events is a practical headache especially for long-term loans.

To conclude: a perfected security interest prevails over an unperfected one, and earlier perfection generally defeats later perfection, absent special rules​.

Those special rules, most notably for PMSIs, show a shared policy to protect certain creditors who facilitate acquisition of collateral, though the exact procedures (notice timing, etc.) differ slightly among the jurisdictions​.